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Mr Erkki Liikanen

Member of the European Commission, responsible for Enterprise and the Information Society

"eEurope: Challenges and Opportunities"

2nd Annual Nordic e-business Conference

Stockholm, 11 October 2001


Ladies and gentlemen,

The new economy and the Internet have been on top of the EU agenda since the Lisbon Summit, in March 2000. EU leaders set a new ambitious frontier for Europe: to become the world's most competitive and dynamic knowledge-based economy. To reach this goal, the Commission devised a comprehensive strategy: the eEurope 2002 Action Plan.

This was one and a half year ago. This was the time of the boom. A time when some were talking, or dreaming, about the end of economic cycles. What nobody knew at the time, was that high-tech stocks had already reached their height. Few imagined that the economic slow-down would be so sharp.

Is this to say that the new economy is history? That we can forget about the Internet? That Lisbon and the eEurope strategy are definitively dead? It is all over? No. Let me explain why:

  • First, because the new economy is a new model which concerns the entire economic fabric: A growing number of companies of all sizes and sectors take up the Internet, and so do public administrations. So the hype may be over, but this integration of the old and the new economy goes on.

  • Second, as this integration progresses, so does the shift towards a networked and knowledge-based economy. This means a global economy where interdependence between nations is stronger than ever. It also means an economy where an ever increasing number of individuals and businesses get connected, and as Metcalfe's Law tells us, the value of the network goes up as the square of the number of users.

The continued growth of the Internet in European homes illustrates this situation: the EU average penetration was 36% in June up from 28% last October. Close to half the EU population has had some experience with the Internet and the percentage of regular users is approaching 40%.

There is a major role for government in this context. Investors are influenced by stock markets, but public policy must not fluctuate with share prices. Stock markets follow quarterly figures: public policies must always have a long-term vision, clear objectives, and constancy.

This does not only concern the economy: more pressing challenges require vision and courage. Government policy must pave the way. Here are our priorities:

  • First, continue to democratise access to new communication services by completing telecoms liberalisation to drive prices further down.

  • Second, cater for the need for security and confidence in cyberspace of users and businesses alike.

  • Third, promote content, which is essential for the development of mobiles and broadband services in the context of convergence.

  • Fourth, accelerate e-commerce, especially for European SMEs.

  • Fifth, bridge the digital divide by giving skills to all.

1. Completing telecoms liberalisation

From the outset, EU telecoms policy had one key objective: to provide high quality services at low prices to European citizens. To achieve this, we have gradually liberalised all segments of the telecoms market. This process culminated in January 1998 with the full liberalisation of services and infrastructures in all Member States.

Thanks to liberalisation, telecoms services became the fastest growing sector of the European economy. Competition keeps intensifying, leading to lower prices, more choice, better quality of service and innovation.

The last bottleneck was removed at the beginning of this year with the unbundling of the local loop. This means that new entrants in the telecoms market can use the local network of the incumbent operator under fair conditions, to propose their own services.

This is a vital step for the development of broadband Internet platforms. As we know, the Internet will not give its full potential until the generalisation of broadband access. Today, we already see increased competition in flat-fee, high-speed Internet access. But unbundling isn't yet a reality in all EU countries. We must speed up things to complete the unbundling process.

Local loop unbundling is expected to rapidly turn ADSL into the preferred platform to access Internet at high-speed, accounting for over a third of all connections to homes and SMEs by 2005.

The resulting competition with other broadband platforms, notably cable modem, will further encourage broadband take-up. By 2005, ADSL and cable modem should together represent 6 out of 10 connections to homes and SMEs. In parallel, ISDN is to disappear, standard dial-up will fall to 25%, and other, faster platforms will start to emerge.

But much remains to be done to create a level-playing field for all competitors. Indeed, the EU telecoms market remains fragmented along national lines. This is particularly the case regarding mobiles, as was illustrated by incoherence in the licensing process for third-generation mobile services.

The success of mobile phones in Europe is striking. In less than a decade, mobiles have conquered 70% of the EU population, and the penetration rate keeps growing. Mobiles have really become part of our daily life and our culture.

This is a very strong European asset. We must build on this technological and industrial success to extend Europe's leadership to the next generation of mobile communications.

The transition to UMTS, the third-generation mobile system with full multimedia capability, is a major challenge. I personally remain confident that the possibility to connect anyone, anywhere, anytime will be a compelling goal for an inclusive information society. What we need to do now is to facilitate deployment through network sharing and other measures, and encourage the development of content for new mobile services.

One must also start looking beyond 3G: first, by ensuring greater coherence in the licensing process in the future; and second, by a high level of research into to the development of future mobile systems.

Another major challenge is to adapt telecoms regulation to the Internet-driven convergence between telecoms, computers and the media. A new regulatory package for electronic communications, which updates the existing telecoms framework, has been tabled to this end. It would also streamline the existing framework, which is the result of a complex procedure over more than a decade. It is to enter into force towards the end of 2002.

2. Accelerating e-commerce

In addition to a new communications framework, the EU has undertaken to secure the Internal Market for e-commerce. The aim is not to regulate this new sector for the sake of it, but rather to provide users and suppliers with the legal guarantees they need to engage in e-commerce. Above all, this is about securing confidence in e-commerce.

The European e-commerce framework is a light one. Legislation is limited to what is strictly necessary in order to avoid any over-regulation which would act as a deterrent. It sets rules and principles that are valid throughout the European Union only in essential areas such as personal data, privacy, copyrights, legal responsibility, illegal and harmful content, cybercrime, taxation, etc.

This framework is technology-neutral. This is made necessary by the fact that e-commerce and new Internet services are based on technology in constant evolution. Any technological solution embedded in law could make this law obsolete before it comes into force. It must therefore be up to industry to chose and implement the most appropriate technological solutions to upheld the law at a given time.

E-commerce legislation is complemented by self-regulation, which the Commission sees as an efficient and flexible alternative to address certain issues: for instance through codes of good conduct or alternative dispute resolution mechanisms. This, of course, implies some real cooperation between government and industry, leading to a kind of co-regulation.

Another problem with e-commerce is that it ignores borders. No individual government can regulate the Internet in isolation. This also applies to the EU as a whole. At the same time, creating a consistent global framework is a major challenge considering the diversity of political and legal systems, as well as cultures. However, we must agree on minimum rules at international level. To this end, and whenever possible, EU legislation embeds international cooperation mechanisms.

In addition to legislative measures, the EU has also adopted more specific measures to support the development of e-commerce in the EU:

  • First, the promotion of electronic procurement by EU governments.

  • Second, the setting-up of an ".eu" top-level domain name.

  • Third, measures aimed to help SMEs enter in the e-commerce era. This includes take-up and best practice research projects, as well as the more recent "Go digital initiative".

3. Security and confidence building

Competition and legal guarantees alone will not be enough to ensure widespread Internet and e-commerce take-up in Europe, whether at home or on the move. It must be complemented by a high level of security and privacy on the Internet.

Users need to feel safe. This is not the case right now. A growing number of users experience security and privacy problems. Between October 2000 and last June, spamming has almost tripled and virus attacks doubled. The EU has already taken several key measures regarding security and privacy:

  • It has fully liberalised the trade of encryption technologies between Member States, which allow to secure confidentiality.

  • It has adopted legislation to ensure the lawfulness and mutual recognition of electronic signatures between EU countries. These are key to securing the integrity and authentication of electronic data.

  • Legislation has been adopted to protect personal data. It grants individuals the right to access and correct their personal data, and to opt out of their use for direct marketing. For sensitive data, such as race and religion, explicit consent is required.

  • A proposed piece of legislation aims to secure the confidentiality of communications, and prior consent (or opt-in) to receive unsolicited commercial communications (spamming).

However, more needs to be done. Networks have become critical for the proper functioning of our societies and economies. Therefore, the Commission has recently published a Communication on network and information security. Our main policy proposals are:

  • to raise awareness: public information and education campaigns should be launched and best practices promoted;

  • to create a European warning and information system to strengthen the activities of Computer Emergency Response Teams, or similar entities, and improve the co-ordination amongst them;

  • to examine how to best organise, at European level, pro-active measures to develop forward looking responses to existing and emerging security threats (e. g. an Information Security Observatory);

  • concerning the legal framework, to set up an inventory of national measures taken in accordance with relevant Community law.

Our objective is to table a comprehensive strategy on the security of electronic networks before the end of the year.

4. Promoting content

Now assume we have genuine and fair competition, and a high level of security and privacy. This is still not enough to ensure the long-term development of the Internet. You don't sell a service simply because it's cheap and safe. What the consumer is interested in, is what's 'in' the box.

The convergence process puts distinct distribution platforms in direct competition with one another: today, we already see telecoms operators in direct rivalry with cable operators, and three-way rivalry with satellite operators will follow. But the average end-user is not interested in the delivery method. What's matter to her or him is 'what' is delivered.

The real battle is only starting: it is the fight for eyeballs. It is clear that Internet surfing will compete with TV viewing, that active media will compete with passive media, and that, to some extent, they will merge. For instance, elements of interactivity are being integrated in the TV watching experience, and streaming media is developing on the Web.

But some differentiation will remain. If you need to be connected 24 hours a day, a mobile terminal may be the solution. But if you want to watch a movie, the display of your mobile phone or PDA will not be up to the job. It is the TV set which is then likely to be the preferred option. But if you then want to surf on the archives of the world, you will probably log on to your computer. Hence, while different access platforms are competing with each other, they are at the same time highly complementary.

Attracting people to these different platforms will depend on the services offered: services are what make the user tick, and the thrill is in the content. If we want an information society for all, content must be rich, diversified, in all languages and it must meet specific cultural demands.

This is key to the rapid development of the mobile Internet, where people will be charged payments for services used. It is also essential for broadband Internet, where people pay extra money to get a faster connection, but what's the point if the content doesn't justify the speed?

Since I'm talking about payment, let me just point out that the passage to the Euro will be a major stimulant for new interactive services. The Euro will add transparency to the European e-market by allowing for instant comparison, as well as additional security by scrapping the conversion exercise.

Now, when we talk about content, we should remember that it encompasses audiovisual and software, but also on-line entertainment, video games, e-commerce applications, publishing, education as well as many public services. It covers all the digitised information, images, sounds and applications that can be transmitted over the networks.

Government is a major player in this context. It owns a considerable quantity of high quality content linked to Europe's formidable cultural heritage. Digitisation of this public content and access to it, is of course a important task for EU governments.

Government is also a major driver of Internet uptake through the offer of high-quality on-line services. Much progress has already been achieved regarding the use of the Internet by governments. In particular, access to public documents and legislation is improving. This is good for openness and transparency. But it is only a first step.

What is still missing is real interactivity, which is the essence of the Net. Once we have true interactivity, a major reform of public services will become possible. Responsiveness, citizen-friendliness and quality of service will become new standards for public services.

In parallel, government will become more efficient. Old and expensive service delivery methods will be replaced by more carefully tailored and targeted services, with important cost-savings and increased efficiency.

For all this to come true, it is of course necessary to invest in digital technologies in front offices. But even more important is the reorganising of the administration, the changes in the operation of the back office.

eGovernment is a huge win-win opportunity. Making sure that public services and citizens will draw its full benefits, is the object of a major conference that will be held at the end of November.

5. Digital inclusion

So, liberalisation drives prices down, security ensures trust, content trigger the user's interest. What is still missing is that people all people have the ability to use the Internet, and also the opportunity to do so.

This is not the case right now. Socio-demographic characteristics continue to have considerable impact on Internet take-up by individuals. The main causes of digital exclusion are female gender, old age, a low education level and living in a rural area.

It all starts at school. Schools must provide all young Europeans with the essential digital skills they need to live and work in the digital age. That very much depends on levels of equipment. We will almost reach the target of having all schools on-line by the end of the year: indeed, we were already at 90% last May.

But connecting schools is not enough: pupils need to be able to use the Internet in all schools, in good conditions. This means pupil access in all schools, as well as recent computers in sufficient numbers, and high-speed Internet connections, also in all schools. And of course, teachers must be trained and curricula adapted. A lot remains to be done.

From schools we must move upwards, and ensure the employability of people already on the job market. Many of them need to adapt their skills or acquire new ones. This is exacerbated by the ageing of Europe's workforce and the accelerated outdating of skills due to the fast pace of technology development. But nobody is too old to learn and digital technologies can facilitate the learning process. This calls for the promotion of life-long learning for all Europeans, using the Internet.

This will contribute to providing a sufficient supply of ICT-skilled workers. ICT skills remain a major issue: first, because there is a continued need of specific high tech skills at the top of the skill pyramid; second, because the more traditional bricks and mortar companies need ICT specialists to move to 'bricks and clicks'.

But the skill issue doesn't stop at ICT. Soon, we will be in a situation where 'everybody' needs at least a minimum level of digital skills. As we move further into the knowledge economy, the share of high-skill jobs in overall employment will continue to grow, for instance new jobs related to content creation. We are not talking about engineers here, but rather creators and information handlers.

Then we need targeted measures in direction of groups which are, or risk being excluded from the digital age. Social inclusion is a duty of the welfare state, but it is also an economic imperative:

  • First, we have to mend the social gap. There is a risk of perpetuating, and even reinforcing, existing social discrepancies. The multiplication of public Internet access points will help achieving access for all.

  • Second, we must help people with special needs to enter the digital age: I'm thinking in particular about sick, elderly or disabled people. Modern technology provides them with new opportunities to be better integrated in society. This, however, requires that we invest in developing adequate technologies.

Beyond social inclusion, we must also remember to integrate our close family, all the candidate countries that will soon join the EU.


In conclusion, the information society is and will remain a top priority for the EU. The spread of the Internet across Europe is in everybody's interest. It can foster economic growth, provide jobs, connect remote places to urban centres, and increase the standard of living. This has not changed. But for all of this to happen, we need:

  • Firstly, a sound legal framework for converged communications services and e-commerce, as well as secure networks.

  • Secondly, innovative, quality content for new interactive services.

  • Thirdly, a skilled population.

And all of this we need throughout the EU of tomorrow, in the current and future Member States. This is the challenge. We must remain focused and keep the sense of urgency.

Thank you for your attention.

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